• John

Will Crypto Make You a Billionaire?

Updated: Feb 19, 2020

Disclaimer : WealthGap does not own any crypto currency. Anything mentioned in this post is not financial advice and is for informational purposes only. All investments carry risk and there is no guarantee of profit nor protection against loss. WealthGap does not provide any legal, tax, or accounting advice.

Crypto billionaires. Wouldn't you want to become one? Start buying dogecoin with your life savings (Disclaimer : I am being sarcastic. This is NOT financial advice. Neither WealthGap nor myself will be held liable if readers buy any crypto currency and realize a loss on their investments). You would not have to work. In fact, you don't have to do anything at all. Just sleep, eat, repeat and you will magically be filthy rich.

I hate to break it to you, but that is probably not going to happen. But wait, aren't there people who became billionaires buying bitcoin? Yes, in the past 5 years bitcoin has returned 2200% as of today. At its peak, early believers made 6000%+ on their bitcoin investment. Well, they just got lucky for the most part. They realized astronomical returns because speculators piled money into bitcoin thinking they can become rich miraculously overnight. However, I do give credit to early investors as they understood bitcoin's underlying technology was legitimate.

Short answer to the title of this post is, no. Crypto and bitcoin are horrible investments but I am not denying a select few coins may go up in value. Please read on if you are interested in learning more.

I used to think bitcoin was worthless, but my recent research on bitcoin and blockchain has proven otherwise. Bitcoin indeed does have value because it has a legitimate money transfer function unlike tulip bulbs (although one could argue tulip bulbs provide aesthetic value lol!). No one can really stop you from sending bitcoin to someone else, since there is no third party like a bank to process the transaction. Bitcoin is beneficial to people who want to send large sums of money without a third party obstructing the transactions and we all know why they like bitcoin so much :).

Why Cryptos/Bitcoin Is Bad Investment

Most random cryptos are going to be close to being worthless and I am not going to delve too deep. I will talk more about why bitcoin is a bad investment since it is the most popular coin. Bitcoin is only worth what others are willing to pay. It does not produce anything and it does not generate any cash flow for its owner. Bitcoin will always have value if people use the service but it doesn't mean it is a good investment! You can use bitcoin to make transactions but you should think twice if you want to make money by holding bitcoin for the long term. Perhaps bitcoin's price will rise, but it is speculation and is not backed by intrinsic value.

Another crucial factor to consider is that you may lose all of your coins. You can lose all of your coins if your bitcoin is at an exchange like Mt Gox and is hacked. You can lose all of your coins if you lose your private key. Your bitcoins will be vulnerable in the event of a 51% attack. If you live in a country where there is no rule of law, your coins can be seized without recourse if you leave your coins at local exchanges. There is no government insurance.

Some developers insist that bitcoin is going to work and you should believe in it. They argue that so many developers are supporting bitcoin and that you should too. While they understand the technology behind bitcoin, they are not investment professionals. Don't be a lemming. Of all the hedge fund managers that I greatly respect, none of them ever endorsed investing in cryptos and bitcoin. If anything, it's the opposite. There is a reason why they are the richest people in America.

Many bitcoin enthusiasts invest in bitcoin because they don't want central banks around the world to erode their money's purchasing power, but does bitcoin's high volatility really protect your purchasing power? You could lose a couple % when you decide to spend the coins just because the price dropped. If you truly want to protect your purchasing power, you should buy stocks! Great companies have moats that enable them to preserve pricing power over their products. Yes, people pay over 1000 dollars for a phone and that is a great example of protection against central bank devaluation of currencies. Would you rather speculate on bitcoin appreciating or would you rather own small pieces of the strongest companies in America?

WealthGap Helps You Invest Like Billionaires

I started WealthGap because I wanted to help those who don't know how to invest but want to build wealth and eventually achieve financial freedom. At WealthGap, we analyze the best performing hedge funds' stock holdings on Wall Street and construct the optimal portfolio for our clients. Normally, these hedge funds have minimum investment requirements that are in the millions but now you can invest in hedge fund quality portfolios with just 5000 dollars. Wall Street's best products are no longer exclusive to billionaires. Moreover, these hedge funds charge an absurd amount of fees. We just charge a fraction of it. It takes about 5 minutes to setup an account on WealthGap's iOS app as opposed to wasting hours at your local banks selling you mediocre products. The key is to invest periodically every month for the long term and don't panic when markets are in a downturn. Over an investment period of 2+ years short term volatility is meaningless.

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